The turbulent period, marked by war, adverse weather and rising energy and input costs, is expected to stabilise to a degree, resulting in the easing of one of the main drivers behind food price inflation, Rabobank has said in its annual agri commodity markets outlook.
The bank predicts global prices of key food staples sugar, coffee, corn and soybeans will fall as production has some time to adjust to higher prices, bringing down costs for buyers and in some cases for consumers too.
Despite relief on prices and availability, the bank still predicts demand to remain weak as consumers continue to deal with economic challenges, including high inflation and interest rates.
Rabobank expects weak global economic growth in 2024 to limit the growth in agricultural commodity demand.
Uncertainty will also persist in other key agri commodity markets. Wheat, which the developing world is particularly dependent on, will be subject to weather-related disruptions and potential restrictions on Black Sea exports, despite large volumes being produced and in storage in the region.
Rabobank head of agri commodities Carlos Mera said describing the past three years of global agricultural commodity prices as volatile was an understatement.
"Producers are still grappling with the after-effects of war, adverse weather, high farm input inflation and weak consumer demand, but eyeing 2024 as the return to a semblance of normality,” Mr Mera said.
For wheat, Rabobank expects another deficit in the global market, the fifth in a row.
There will be little relief from the southern hemisphere crops in the coming months, with both Argentina underperforming and Australia falling well behind the past three years’ very good crops.
RaboResearch Australia and New Zealand general manager Stefan Vogel said Australian wheat receives some price support from drier weather conditions locally, keeping prices on the country’s east coast above the US CBOT price, the global benchmark.
“In Western Australia, basis levels have also improved compared with last year, but WA prices need to be competitive against the likes of Russia given so much of WA’s grain is destined for export markets,” he said.
Russia’s 2024 harvest will likely stay high at levels above 87 million metric tons, but any expectation today is subject to weather uncertainty and export restrictions, according to the report.
Meanwhile, in Ukraine, the war will also continue to affect production and exports, and will lead to a shrinking exportable surplus.
Mr Mera said it won’t be plain sailing but the more positive outlook for the majority of agri commodities should lead to relief for buyers around the world.
"Governments, businesses, farmers and consumers will all feel beleaguered after a volatile few years," Mr Mera said.
"Now’s not the time to toast a recovery, but the outlook for inflation in agricultural commodities is far more positive than in previous years.
“Winners and losers will emerge as agricultural commodities go through different points of the cycle next year.
"We anticipate the South American market will return to a healthier position and bolsters supplies.”
Brazilian farmers are expecting to see a record soybean production crop in 2024 as La Niña weather gives way to El Niño. The bank expects a bumper 163 million metric ton crop haul.
Argentina, the biggest exporter of soy products, is also expected to recover after last year’s harvest failure, boosting global stockpiles, although it will be subject to an uncertain FX policy.
Mr Vogel said beyond the competition from more soybeans, Australian canola producers will have to look closely at three other major price drivers in 2024.
“Global supplies of canola are likely to recover due to strong Ukrainian plantings and the dry spell in Canada, the world’s largest canola exporter, will likely end," Mr Vogel said.
"El Nino might push palm oil supplies short of expectations and support prices. And lastly, demand for vegetable oils will continue to grow exponentially in 2024, with the US biofuel sector consuming even more.”
Sugar prices hit a 12-year high in 2023, as Thailand and India produced disappointing crops, but Rabobank expects a return to more normal conditions in Thailand in 2024/25, which could bring prices down further than the current forward curve predicts.
The bank forecasts the coffee market will hit a surplus of 6.8 million bags in 2024/25, spurred by a recovery of the arabica crop in Brazil and Colombia.
Yet challenges persist as farmers continue to be squeezed by high input costs, labour shortages and weak consumer demand, although demand will likely be slightly stronger in 2024 than in 2023.